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Trillion Dollar Tuesday – Amazon, Alphabet, Apple and Google Race to the Market Top

Who will get there first?

Alphabet (GOOGL) knocked it out of the park with earnings last night and are jumping over $50 higher (5%) after last night's earnings report and that will take them to just under $900Bn but still behind AAPL at $941Bn but now firmly ahead of AMZN ($875Bn) and MSFT ($830Bn) in the race to become the World's first Trillion Dollar Company.

As you can see from this chart, throw in Facebook and the top 5 S&P companies have the market capitalization of the bottom 282 – the difference between mega-caps and what we used to call large-caps has never been greater but it mirrors the more uneven distribution of wealth in our society where the people in the Top 10% THINK they are doing well, only because they really can't comprehend the wealth of the Top 0.01%, which starts at 1,000 times more than they make and 3,000 more than they own. 

Image result for billionaires gone wildThese Monster Companies, just like our Monster Billionaires can throw their money around and buy almost anything and get away with almost anything like Monopolizing On-Line Retail, Using Your Personal Information to make a Profit or even becoming President of the United States.  It is truly terrifying to think of what kind of damage a bad Billionaire could do but thank goodness the US has a system of checks and balances that….  oops…

Oh well, if you can't beat them – invest in them, I guess.  To that end, Alphabet (GOOGL) just beat earnings by $2.21/share, coming in at $11.75 per $1,211 share, now $1,262 in pre-market.  If we assume they keep it up and make $46 for the year, then $1,262/46 is 27 times earnings, which is a lot, but maybe not for a company that made $32/share last year so about 40% bottom-line growth is not all tax cuts – this company is a MONSTER!

GOOGLE barely pulled back when the EU fined them $5Bn for engaging in anti-competitive behavior for giving Android away at a loss but GOOGL's solution will be to charge for Android and PRESTO!, they make much more than $5Bn installing an operating system on 1.3Bn phones – even if they just charge manufacturers $10 ($13Bn).  Giving Android away for free has already made them the default operating system in 85% of the World's phones – $5Bn isn't even a wrist-slap to GOOGL, who have already destroyed all competition except for fellow Trillionaire, Apple (AAPL) who have the rest of the marke with iOS.  

This is like fining Hitler for invading Poland in 1946 – a bit late to undo the damage – the war is already over only Hitler lost and AMZN/AAPL have won since it's virtually impossible to get developers to start making apps for systems with no traction – as even Microsoft (MSFT) discovered.  MSFT recently threw in the towel on the Windows Phone, which failed despite the fact that 5.7Bn people (80%) have computers with Window on them.  They aren't out of the phone business but the new Surface Phone will almost certainly run on Android and, sadly for Microsoft, people are likely to opt to use Google over Bing on those phones too.

Meanwhile, Alphabet makes up 9.2% of the Nasdaq's weighting because both GOOG and GOOGL are components – even though they are essentially the same stock but only GOOGL has voting rights yet people still buy GOOG with no rights because, well, because they are idiots…

Actually, everyone buying GOOG(L) stock is an idiot because the "Founders Stock", which you can't buy, has 10x the voting rights per share of all other shares meaning it doesn't matter how much of GOOG(L) you own because, if you don't own over 90% of the regular voting stock – you still have no say in the company.  So far, it's hard to disagree with what the company has been doing though, even at $46/share, GOOGL is only dropping $20Bn to the bottom line vs $55Bn for AAPL yet the companies are carrying roughly the same valuation.

So, either GOOGL is over-valued or AAPL is under-valued or a little of both but, either way MSFT, who also make about $20Bn a year and and AMZN ($3Bn) or even FaceBook ($15Bn) should not be swimming in AAPL's pool at the Trillion-Dollar water-mark so, overall, the entire Nasdaq is dangerously over-valued here – even though we feel AAPL is still a bargain at $1,000,000,000,000. 

They are 36% of the Nasdaq by weight and other Nasdaq companies, like Netflix (NFLX) and Tesla (TSLA). are dangerously over-priced with the whole index having a p/e ratio of 27, 10% higher than the S&P 500 which is 50% above its historical average.  So far, we've been hearing great reports from the Banksters and the Monopolies but earnings season is still young and the Nasdaq is still my favorite index short.  This morning the Nasdaq (/NQ) Futures are hitting 7,460 as GOOGL explodes higher and we can short that at the line (tight stops above), but I think it's going to be a good time to press our shorts in the Short-Term Portfolio – as we need to lock in the gains on our Long-Term Portfolio positions (see our reviews from last week).  

SQQQ should drop to near $12 this morning and we can hopefully double down on our Jan $10 calls at about $2.50 per contract ($3.20 avg) and then, when we get a bounce, we'll look to sell the Jan $20 calls, now 0.70, for about $1.20 and then we'll net into the $10/20 spread for $2 so we'll be at the money with our protection.  This works even better as a new trade as it gives you great protection as it's a 3x ETF so a 20% drop in the Nasdaq will pop SQQQ 60%, from $12 to $19.20 and that would put the long calls over $9 for a gain of $7 (350%), which is the kind of leverage we like to have on our hedges.

Oops, now there are rumors that China may be adding stimulus to their economy so no shorting yet – we'll have to wait and see how high we pop but hopefully 7,475 and certainly 7,500 will be a great shorting line on /NQ.

 


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  1. Speaking of the NASDAQ, need to add more lines!


  2. Another take on the R&D spending stats:


  3. Tax cuts are not benefiting the workers:

    https://www.vox.com/2018/7/23/17602746/tax-cuts-work-bloomberg-wages

    Mainly because that's not what they were designed to…. Add tariffs and hig gas prices and the middle class is getting hit hard by the beautiful Trump economy. Thankfully, the market is up so the bottom 50% is swimming in capital gains :-)


  4. Good Morning.


  5. AKS & HL, a couple of my dumpster dives, have moved up sharply in the past two days.


  6. Good morning!  

    Well, we were curving over on the Big Chart but that's off for now.  

    China unveiled a package of fiscal policies on Monday to boost domestic demand amid growing concerns of slowdown resulting from trade war, which sent Chinese and Asian stocks sharply higher. According to a Chinese government statement, fiscal policy should now be “more proactive” and better coordinated with financial policy, a signal that the finance ministry will step up its contribution to supporting growth alongside the central bank, and the likely outcome of the "war of words" that we previously noted had recently erupted between the Ministry of Finance and the PBOC.

     

    The measures which were announced late Monday following a meeting of the State Council in Beijing, include everything from a tax cut aimed at fostering research spending to special bonds for infrastructure investment, and are intended to form a more flexible response to “external uncertainties” than had been implied by budget tightening already in place for this year.

    Specifically, the fiscal package contained measures that included giving an additional tax cut of 65 billion yuan ($9.6 billion) to companies with R&D expenditure, expediting non-budgeted special bond sales to assist local government infrastructure financing and easing restrictions on banks’ issuance of financial bonds for small firms.Private investment would be boosted by introducing projects in transport, gas, and telecommunications, local governments will be pushed to make better use of untapped fiscal funds, and policies to attract foreign businesses to re-invest will be improved together with further opening up.

    The meeting reiterated language that China will strike a balance between easing and tightening and keep liquidity “reasonable and sufficient.” It also pledged to improve the transmission of monetary policy, a phrase the PBOC had dropped since a campaign to curb credit growth started in late 2016.

    As Bloomberg reported, Nomura said the statement signals “the start of fiscal stimulus,” Guotai Junan Securities Co. said it “confirmed the easing bias in monetary policy,” and Deutsche Bank AG views it “as a confirmation of policy stance changing toward loosening.” Standard Chartered said policies will be slightly looser to support domestic demand but that there is no intention to introduce large stimulus.

    So there you go – can't short that! 

    R&D/StJ – Again the distortion is caused by the fact that 80% of Global Market Cap is US-based companies and they are spending the money – often redundantly while China has a more focused effort that puts us behind in many areas.  You would think the US should be #1, not way behind Korea and Israel (Japan is no surprise but Finland?).  

    Wages/StJ – What a joke!  

    AKS/Albo – That's a good one.  HL interesting down here but we're trying to nurse ABX back to health.


  7. Oddly, no one seems to care:

    Asia Stocks Set to Gain; U.S. Yields Eye 3% Again. Futures tipped Asian stocks to open higher, with strong Alphabet Inc. sales potentially boosting technology shares and rising yields boosting financials. Ten-year Treasuries slipped, pushing yields to the highest in more than a month. Equity index futures rose in Japan, Australia and Hong Kong. Even so, gains may be kept in check as U.S. futures opened lower in Asia. The S&P 500 Index started the week higher, with financials leading the gainers amid below-average trading volume. Amazon.com pulled consumer discretionary stocks lower after President Donald Trump renewed his public campaign against Jeff Bezos’s Washington Post. Alphabet shares were 3.7 percent higher in after-market trading. Futures on the Nikkei 225 Stock Average gained 0.2 percent in Singapore. Futures on Australia’s S&P/ASX 200 Index climbed 0.3 percent. Hong Kong’s Hang Seng Index futures rose 0.2 percent. S&P 500 Index futures were little changed as of 7:09 a.m. in Tokyo?

    Central Bank Chatter Rattles Bond Market.

    Case for a Steeper U.S. Curve Gets a Boost From BOJ Speculation.

    This selloff in U.S. government debt will prove short-lived, Morgan Stanley says.

    China Hedge Funds Trigger Investor Unease With June Implosion.

    Japanese Jawboning Sparks Global Bond Rout; Stocks, Dollar Unimpressed. 

    How is it that Morgan Stanley still gets to say anything?  They were the ones that went down in flames in the last Financial crisis while saying "All is well" and had to be rescued by BAC. 

    Related image 


  8. PHIL:  What WHR puts would you sell at this time, or are you waiting for downgrades?  Or turned off by their earnings?  Thanks.


  9. Phil,

    Nice little dip on WHR; your thoughts on a nice 2020 $110 put, 5 contracts to start with, or wait for the down grade police. Thanks as always.


  10. Looks like we trading tooooo much!

    TD Ameritrade (AMTD) beat estimates by nine cents with adjusted quarterly profit of 89 cents per share, with the online brokerage’s revenue also coming in slightly above Street forecasts. The company also reported a bigger than expected increase in client trading activity


  11. Jasu1 you need to form the iron when it is hottttt! See put sale of AVGO.


  12. Yodi, I got a bit concerned with the price on AVGO, especially with what is going on with trade tariffs and duties on steel for WHR…..hence my hesitation. I am following your posts , smaller number of contracts for me though. Keep them coming!


  13. Watch GOOGL tomorrow max up today 1275. People like to buy when prices are at its max.


  14. Phil

    Any trades in

    Square, Inc. (SQ)

    PayPal Holdings, Inc. (PYPL)

    For the payment business

    Thanks


  15. Jasu1 small numbers very good Idea. You can look in two ways at todays market. Short term look at the mood of Trump. Long term what will be left after him. How long still, well I trust even the blind hens will find a corn sometimes and it will even open their blind "clowns" eyes to see.


  16. Whr I feel it is not only the steel, but the sales must be down, and their outlook is not to positive.

    I trust Trump does not use a washing machine, so why would he worry.


  17. I still hold the Jan 20 80 and 125 putter, so why would I worry now. Question how long will a clown role the country.?


  18. Yodi,

    STUPID has no term limit, and a SIMPLE deplorable will vote for him against their own self interest. You can't fix that!


  19. Jasu1 Hard to understand for people on this side of the pond.


  20. jasu1, this struck me when I read it not long ago.. an NBC News story on midwestern farmers hurt by tariffs. Here's a quote: "Even though it might be bad medicine, I think if the president is telling the truth, he's got a lot of experience with negotiation. He wrote a book on it."   So when your leader has convinced you that smacking you in the face is good for you, then what is there to say?


  21. HMNY back over 0.10!

    25,250 too tempting not to short on /YM.

    WHR/John – In the LTP, we sold the 2020 $130 puts for $11.20 and they are back at that price now after falling 14% but what an over-reaction to $3.20/share, which missed $3.63/share expected but last year was $3.35 and it was raw material inflation (steel tariffs) and poor exchange rates that killed them – not something wrong with the company.  Margins actually EXPANDED compared to last year. 

    Adjusted operating profit (EBIT) declined 2% to $343 million from $350 million in the year-ago quarter. However, operating margin expanded 20 basis points (bps) to 6.7%, aided by favorable product price/mix and restructuring benefits, partly negated by raw material inflation, unit-volume declines and unfavorable currency.

    Adjusted operating margin of 3.8% contracted 200 bps, mainly due to a trucker strike in Brazil. In dollar terms, operating income declined 42.1% to $33 million.

    Revenues from Asia improved nearly 14.7% to $428 million from $373 million in the prior-year quarter. Excluding currency effects, revenues rose 14.5%. Moreover, the segment reported adjusted operating profit of $43 million, up significantly from $10 million in the year-ago quarter. Adjusted operating margin expanded 760 bps to 10.1%. The improvement was driven by gains from an acquisition-related government incentive as well as a favorable product price/mix, partly offset by raw material inflation and negative currency movements.

    They also bought back $1Bn worth of their own shares – always stupid.  

    Following the dismal second quarter and expectations of increased raw material costs in the future, Whirlpool cut its GAAP and adjusted earnings per share forecast for 2018. It now envisions adjusted earnings per share to be $14.20-$14.80 compared with the prior guidance of $14.50-$15.50. On a GAAP basis, it now anticipates earnings of 15-75 cents per share compared with $12.30-$13.30 per share expected earlier.



    The company expects to gain from a favorable product price/mix and share repurchases through the rest of the year. However, lower global revenue growth, expectations for higher global cost inflation and soft EMEA performance are likely to weigh on the results.

    I don't really care what expectations WERE, I care that the company WILL now earn $14.50/share and they've got plenty of cash so I have no problem at all giving them 10x earnings, which would be $145/share, not $130.  We'll see who low they go but we've held the short puts since Jan and this will be our first chance to add a bull call spread so – OPPORTUNITY!

    As a new trade, I'd still sell the 2020 $130 puts (now $17) as a base:

    • Sell 5 WHR 2020 $130 puts for $17 ($5,100) 
    • Buy 10 WHR 2020 $120 calls for $21 ($21,000) 
    • Sell 10 WHR 2020 $140 calls for $12 ($12,000) 

    That's net $3,900 on the $20,000 spread that's $10,000 in the money at $130 so all WHR has to do is stop falling and you do very well up to a max profit of $14,100 (360%) if they manage to make it back to $140 in 18 months.

    That's so good, we'll likely be MORE aggressive than that in the LTP – just waiting to see where they bottom.  I'd do the put sale now though, as you never know if those prices will last.  

    Wheee, nice dip – don't waste it being greedy on the index shorts!

    /YM 25,200 is now the stop line.


  22. /RTY got crushed but 1,695 now a fun bounce play (long, with tight stops under).

    Really obvious one to play off this chart, right?


  23. SQ/QC – I like them as a concept but they don't actually make any money as they are following the Movie Pass model of getting a lot of users first and then worrying about how to make money.  It's Jack from Twitter's company so you just have to give them time but only $2.2Bn in sales and a $28Bn valuation means they are YEARS away from growing into it so no hurry for me to invest. 

    Year End 31st Dec 2012 2013 2014 2015 2016 2017 TTM 2018E 2019E CAGR / Avg
    Revenue $m 0.000 552.4 850.2 1,267 1,709 2,214 2,421 1,466 1,977 +41.5%
    Operating Profit $m 0.000 -103.7 -150.5 -173 -170.5 -54.2 -61.1      
    Net Profit $m 0.000 -104.5 -154.1 -179.8 -171.6 -62.8 -71.7 217.2 374  
    EPS Reported $ 0.000 -0.32 -0.47 -0.63 -0.50 -0.17 -0.19      
    EPS Normalised $ 0.000 -0.25 -0.38 -0.53 -0.40 -0.051 -0.063 0.46 0.80  
    EPS Growth %                 +73.6  
    PE Ratio x           n/a n/a 156.2 89.9  
    PEG x           n/a n/a 2.12 1.73
    Profitability

    PYPL, on the other hand, makes $1.8Bn on $13Bn in sales but then they ruin it with a $108Bn market cap.  This market is MADNESS and you're not going to get my blessing on this nonsense!

    Wheeee, nice pop back up – don't be greedy – there's no reason for any of this BS…


  24. The Welfare Boogeyman



  25. Who Just Beat the Bay Area in Tech Jobs? Toronto








  26. WHR – although short term volatile, maybe worth a bet on some stabilization – how about going for the Aug 17 $135 / $125 strangle which can be sold for $3 and expires in 24 days time?

    If it goes down then it would be good to scale into more BCS, and if it goes up it would be good to layer on more BCS to provide ammo for rolling the short Aug calls?


  27. Wow, I'm all jazzed up from Trump's war talk – let's go kill foreigners!  

    He's so proud that he's ordering hundreds of F35s he said were too expensive when he was running.

    China's new stealth fighter uses powerful materials with geometry not …

    Back to sell-off mode so 25,200 is now the shorting line with tight stops above.  Watch 7,400 on /NQ, 2,820 on /ES and 1,697.50 on /RTY to confirm we're still going down.

    WHR/Winston – Not for me, they just dropped $20 in one day and you want to bet they don't move $5 in the next 20?  I'm not ambivalent about them, I think $130 is a fine price to pay so I simply sell puts and buy a bull call spread and wait for the stock to go up.


  28. Phil (aka Swami Zen Calm Premium Burn) – I thought you might say that. Bad karma if I do otherwise.


  29. WHR so far sold the Jan 20 125 put and only bought the Jan 20 120 call, will wait for the sale of the caller in the expectation to get a better price.


  30. Kodak's embrace of blockchain not going so well  – with hat tip to Slope of Hope.


  31. Winston good logic in Phil's comment. See AVGO or even see better GOOGL up 61 in the morning now only 34 obviously the reverse effect of WHR.


    • China overnight announced a mix of tax cuts and infrastructure spending, and the PBOC injected a massive $74B into the banking system.
    • Already facing slowing domestic conditions, the mandarins in Beijing must also deal with the uncertainty of trade policy with the U.S.
    • The U.S. president this morning: "Tariffs are the greatest! Either a country which has treated the United States unfairly on Trade negotiates a fair deal, or it gets hit with Tariffs. It’s as simple as that – and everybody’s talking! Remember, we are the “piggy bank” that’s being robbed."

    • Johnson Redbook Chain Store Sales:+3.8% Y/Y vs. +3.3% last week.
    • The week included the 36-hour Amazon Prime Day event .
    • July sales were up 3.5% through July 21.
    • July U.S. PMI Composite Flash55.9 vs. 56.3 consensus, 56.0 prior.
    • Manufacturing PMI 55.5 vs. 54.9 consensus, 54.6 prior.
    • Services PMI 56.2 vs. 56.4 consensus, 56.5 prior.

    Bitcoin retakes $8K

    • Up more than 5% to $8.1K this morning, Bitcoin (BTC-USD) is topping $8K for the first time in two months. The bounce has now hit nearly 50% since bottoming in late June.
    • Notable in the price action of late has been Bitcoin's outperformance vs. the rest of the crypto market: 1) Bitcoin accounts for 47% of total cryptocurrency market cap today vs. 37% two months ago 2) Bitcoin is the only top 10 market cap crypto which is in the green over the last 24 hours.

    Oil could soar to $200/bbl if U.S., Iran go to war

    • Iran will respond with equal countermeasures if the U.S. tries to block its oil exports through the Strait of Hormuz, the foreign ministry in Tehran says a day after Pres. Trump's twitter warning of dire consequences “the like of which few throughout history have suffered before” if it makes threats against the U.S.
    • John Kilduff of energy hedge fund Again Capital says Brent crude is on a path to $90/bbl because the Trump administration is unlikely to issue many waivers to U.S. sanctions against Iran but could pop well into three figures if Iran ever shuts down the Strait.
    • "The numbers on a blockage or any kind of upset or military situation in the Strait of Hormuz, then it's off to the races. Pick your number – $150, $200 - it goes sky high," Kilduff says. "Because we are talking about an abject shortage of oil then in the global market."
    • Iran could cause problems in other regional sea routes such as Bab el-Mandeb, the strait off the coast of Yemen, where Iranian-aligned rebels are fighting a Saudi-led coalition, says RBC Capital's Helima Croft.
    • "I don't think anyone believes that with the U.S. Fifth Fleet in Bahrain that we cannot protect ships going through there, but if we start having to deploy those military resources, I think that's going to put additional pressure on oil," Croft says. "That's the scenario for a real breakout in oil prices in the back half of this year."
    • Oil prices jumped by ~$1/bbl yesterday following Trump's tweet but ultimately pulled back to end the day roughly flat; currently, Brent +0.1% at $73.18/bbl, U.S. WTI +0.5% at $68.23/bbl
    • Peabody Energy (BTU -1.4%) is lower after Q2 earnings swung to a profit from a year-ago loss and revenues rose 4% Y/Y to $1.31B, but both figures missed Wall Street consensus expectations.
    • BTU says improved Q2 sales were driven by a 20% increase in Australian met and thermal sales volumes, but prior-year shipments of Australian metallurgical volumes were temporarily reduced in Queensland from Cyclone Debbie.
    • For Q3, BTU expects the longwall move at its North Goonyella Mine to hurt metallurgical segment adjusted EBITDA margins by ~$15/ton related to costs and sales mix, partly offset by increased export thermal coal sales, higher U.S. volumes and positive resource management results related to the sale of exploration tenements in Australia.
    • BTU also expects Australian export thermal volumes to continue to increase sequentially, with Q4 anticipated to be the segment's strongest shipping quarter.
    • Transocean (RIG +1.2%) is higher after disclosing a range of new contracts while also seeing dayrates cut for some of its drillships, according to its latest fleet status report.
    • RIG says it has added $405M in contract backlog since the previous fleet status report, which now totals $11.7B, including dayrate reductions on four of its newbuild drillships.
    • RIG says its ultra-deepwater semi-submersible Development Driller III, idle since last October, was awarded a 180-day contract with Exxon offshore Equatorial Guinea at an undisclosed dayrate; the Transocean Spitsbergen semi-sub was awarded a three-well contract plus six one-well options with Equinor offshore Norway.
    • Shell reduced dayrates for four drillships all working in the Gulf of Mexico: the Deepwater PoseidonDeepwater PontusDeepwater Proteus and Deepwater Thalassa.
    • TransUnion (NYSE:TRU) sees Q3 adjusted EPS 61 cents-62 cents, including a 7 cent benefit from tax reform.
    • For the year, TransUnion now sees adjusted EPS of $2.42-$2.44 (including a benefit of 28 cents from U.S. tax reform measures) and revenue of $2.333B-$2.343B; adjusted EBITDA is expected to be $904M-$910M.
    • Q2 adjusted EPS of 62 cents vs. 47 cents a year ago.
    • TRU -0.8% in early trading.
    • Adjusted EBITDA margin was 39.2%, unchanged from a year ago.
    • U.S. information services operating income rose 14% to $96M Y/Y, while revenue increased 20% to $358M.
    • International operating income increased 26% to $16M on a 22% rise in revenue to $106M.
    • Consumer interactive operating income rose 9% to $54M as revenue increased 12% to $118M.
    • Source: Press Release
    • Previously: TransUnion beats by $0.03, beats on revenue (July 24)
    • Ford (F +1.2%) announces that the creation of Ford Autonomous Vehicles to help  accelerate its AV business and capitalize on market opportunities.
    • Ford Autonomous Vehicles will include Ford’s self-driving systems integration, autonomous vehicle research and advanced engineering, AV transportation-as-a-service network development, user experience, business strategy and business development teams.
    • Ford AV will also hold the company's stake in Argo AI.
    • The new LLC is structured to take on third party investment.
    • "Ford has made tremendous progress across the self driving value chain – from technology development to business model innovation to user experience,” says Ford CEO Jim Hackett. "Now is the right time to consolidate our autonomous driving platform into one team to best position the business for the opportunities ahead," he adds.
    • Source: Press Release
    • via Bloomberg
    • It's now costing about $2M to insure against default on $10M of Tesla's (NASDAQ:TSLA) debt. That's up from roughly $1.7M prior to reports the company was asking suppliers for retroactive refunds.
    • The common stock is going the other way, down 2.4% today to the lowest since early June.
    • Lockheed Martin (NYSE:LMT+2.7% premarket after easily beating analyst estimates for Q2 earnings and revenues while guiding FY 2018 EPS and revenues above consensus.
    • For FY 2018, LMT raises its EPS guidance to $16.75-$17.05 from its prior outlook for $15.80-$16.10 and well ahead of the $16.17 analyst consensus estimate, and forecasts FY 2018 revenues of $51.6B-$53.1B vs. $51.4B consensus and prior guidance of $50.35B-$51.85B.
    • LMT also hikes its expected annual cash flow for the year to ~$3.3B from its previous expectation of $3B.
    • For Q2, net sales in the aeronautics unit increased 8% to $5.32B, primarily attributable to higher net sales of ~$370M for the F-35 program; missiles and fire control jumped 17% to $2.08B, partly due to higher volume for the THAAD missile defense system; rotary and mission systems added 4% to $3.56B; and sales in the space division slipped 1% to $2.42B.
    • United Technologies (NYSE:UTX+2.4% premarket after reporting Q2 earnings and revenue that topped analyst expectations and raising full-year guidance.
    • UTX says Q2 EPS increased to $1.97 excluding the gain on sale of food service equipment company Taylor Co. and restructuring charges, on 9% higher revenue Y/Y to $16.7B; commercial aftermarket sales rose 12% Y/Y at both Pratt & Whitney and UTC Aerospace Systems, while new equipment orders for Otis climbed 10% organically Y/Y.
    • UTX raises guidance for its FY 2018 adjusted EPS to $7.10-$7.25 from its previous view of $6.95-$7.15, in-line with the $7.11 analyst consensus estimate, its sales outlook to $63.5B-$64.5B from $63B-$64.5B but still a shade below the $64.7B consensus, and its forecast for organic sales growth of 5%-6% from 4%-6% previously.
    • The company maintains previous guidance for full-year free cash flow of $4.5B-$5B.

    • JetBlue (JBLU -9.2%) is down sharply after initially shares were showing a post-earnings gain.
    • Investors seem to be latching on to the higher fuel costs that are biting at JetBlue's bottom line. The company expects an average prce per gallon of $2.33 in Q3, with only about 7% of its consumption hedged. As a consequence of elevated fuel costs, JetBlue pulled back on growth plans for 2H.
    • Several other airline stocks are trading lower following the JetBlue release, including Spirit Airlines (SAVE -2.5%), United Continental (UAL -1.2%), Hawaiian Holdings (HA -3.8%), Allegiant Travel (ALGT -3.2%), Alaska Air Group (ALK -2.7%), Rynair Holdings (RYAAY -2.4%), Southwest Airlines (LUV -1.4%) and SkyWest (SKYW -1.3%).
    • Allegheny Technologies (NYSE:ATI+7.3% premarket after routing Q2 earnings expectations on 15% higher revenues and saying it expects strong H2 cash generation.
    • ATI says Q2 sales in its high performance materials and components unit rose 12% Y/Y to $592M, as continued strong sales of next-generation jet engine products jumped 39% to $146M, driving segment operating profit margin to 16.5% of sales.
    • Flat rolled products revenues increased 18% to $418M, delivering $26M in segment operating profit, or 6.3% of sales, a significant improvement Q/Q and Y/Y.
    • In the HPMC segment, ATI expects continued Y/Y revenue and operating profit growth in H2, resulting from ongoing aerospace market demand growth and improved asset utilization; in the FRP segment, ATI sees continued strong end-market demand and benefits from ongoing operational improvements.
    • ATI says it expects strong H2 cash generation, with at least $150M of free cash flow for the full year.
    • Oppenheimer maintains a bullish view on Caesars Entertainment (CZR +1.1%) ahead of the casino operator's Q2 earnings report next week.
    • "We believe strong Las Vegas Strip RevPAR growth of 4% (vs. guidance of 3-5%), keen cost controls and the benefits of new IT investments, will drive a solid quarter," reads the firm's note. "A 2Q18 beat, along with strong Las Vegas growth and near industry-leading EBITDA margins (~26%), could help the stock separate from its peers and be viewed as a highly attractive investment," advises Oppenheimer.
    • Oppenheimer keeps an Outperform rating on Caesars and price target of $15.00.

    3D printing stocks drop with no clear catalyst

    • 3D stocks on the move with no clear catalyst.
    • Movers: 3D Systems (DDD -8%), Stratasys (SSYS -5.6%), ExOne (XONE -3.1%), Voxeljet (VJET -0.8%). 

    Wells sees bright pricing spots in Verizon's 'very solid' Q2

    • Evaluating Verizon's (VZ +0.3%) "very solid print" for Q2 earnings, Wells Fargo sees the carrier benefiting from its more expensive plans getting user traction.
    • Some of the revenue beat was due to revenue recognition standards, Jennifer Fritzsche writes, but the company's wireless business was a shining spot with easy beats in service revenues, postpaid phone net adds and postpaid ARPU. Lighter results in wireline margins and video losses make sense with the company's focus on wireless, she says. (h/t Bloomberg)
    • Wells is Overweight on the stock with a $58 price target, implying 14% upside.

    Gogo -2.7% as Raymond James foresees 'turbulence'

    • Gogo (NASDAQ:GOGO) is 2.7% lower premarket following a downgrade to Market Perform from Raymond James.
    • The company's in for "several more quarters of turbulence," with convertible bonds callable in 2019 and likely negative free cash flow again in 2019, as well as a further industry shift toward airline-directed pricing. (h/t Bloomberg)
    • Shares have lost 67% of value so far in 2018.

    Analysts raise Alphabet targets after earnings

    • J.P. Morgan reiterates its Overweight rating and raises its Alphabet (GOOGGOOGL) price target from $1,285 to $1,440, a 19% upside to yesterday’s close.
    • Analyst Doug Anmuth cites the strong top line results and notes that “Investments in machine learning & AI are driving innovation throughout Alphabet’s businesses, including mobile search, cloud, Google Home, Assistant, Waymo, etc.” 
    • Anmuth sees “meaningful runway across search and YouTube as ROI improves and TV dollars shift more online.” The analyst also sees strong momentum in Cloud, Play, and hardware. 
    • More action: KeyBanc reiterates its Overweight rating and raises its Alphabet target from $1,230 to $1,430. 
    • Analyst Andy Hargreaves says the firm believes that “strong growth potential remains in opportunities with cloud, hardware, YouTube, Waymo, and Other Bets, which should add significant value over time.” 
    • Alphabet shares are up 4.4% premarket to $1,259.  
    • Previously: Alphabet nears 5% evening gains on paid clicks, revenues jump (July 23)

    Apple faces two hits from Trump's tariff threat

    • The WSJ reports on how Apple (NASDAQ:AAPL) iPhones could take two hits in the latest tariff threat President Trump made against China.
    • Smartphones weren’t included in the prior three levies on Chinese goods. But Trump’s threat of putting levies on $500B in imports would include nearly everything China ships to the U.S., which includes iPhones since the devices are assembled in the country. 
    • The Trump proposal could tax the phones both within China and upon U.S. entry.
    • Apple shares are up 0.8% to $193.12.  

  32. Karma/Winston – Not the universal truth, just statistics.  

    Yikes, what did Trump say?  Sounded like his normal nonsense to me…


  33. Oh, I forgot to reiterate the DD call for our SQQQ calls in the LTP (Jan $10s) from the morning post – just in case anyone missed it.


  34. Phil/SCO,

    did we close out of the Sept 13 Calls. Sorry if I missed it..

    regards


  35. Pat hanging in with SCO Sep 13 waiting for that big oil glut. Waiting Iran closes the straights to send oil to the moon.


  36. SQQQ/Phil- we got the 10/25 BCS Jan, so it looks like we trying to build another bcs of 10/20?


  37. SCO/Pat – As noted on Thursday:

    Submitted on 2018/07/19 at 12:06 pm

    Oops, I forgot our SCO spread in the STP.

    SCO Sept $16 puts can be sold for $1 – not an exciting number for the STP so we'll wait a bit but net $15 is a good floor.  The Sept $15 ($3)/18 (1.50) bull call spread is a good play as $17.50 is $68.50 and we're expecting to be below that so, at the moment, the combo with a full cover is net $0.50 on the $3 spread or net $1 with just 1/2x cover so I think I'd go for that and sell 10 puts ($1,000) against 20 bull call spreads ($3,000) for net $2,000 on $6,000 worth of spreads that are pretty much in the money.  

    It's cheaper now but still a good trade set-up for shorting oil into the holiday weekend. 

    SQQQ/Dave – We bought back the short $25s and had just the 80 long $10s so now 160 long $10s and we'll sell the $20s when we get a good price. 

    Thanks Yodi.


  38. Trump now paying farmers $12Bn bribe to offset tariffs from China – what a wasteful mess this thing is! 

    Keep in mind, that's just the damage, just to farmers from his first $50Bn of tariffs which, at 25%, would generate $12.5Bn in tax revenues.  This is completely insane!  


  39. Trump / Phil – I think that they are reading poll numbers and are worried about the Nov. election!


  40. HMNY – The Company will effect a reverse stock split of its issued and outstanding common stock at an exchange ratio of 1-for-250, at 4:01 p.m. Eastern Time on Tuesday, July 24, 2018. 

    https://finance.yahoo.com/news/helios-matheson-analytics-inc-announces-180500937.html


  41. Can't believe it's still trading at .09 .


  42. HMNY might be trading like a 3x ETF where they have to reset it on a regular basis because of decay! In this case more likely because of dilution!


  43. LB/Phil- I have 2020 half covered 30/40 BCS and sold half of the BCS in $40 puts… should I adjust and DD?


  44. 1 for 250… we find all the best reverse split opportunities here.


  45. It should reverse to about $22 per share.  Then it will probably start sinking again from there.


  46. Phil/HMNY,

    I do not understand it. They just diluted and again reverse split. How does that work?

     Is it just a way to screw people? I have quite a few 2020 $1 calls. are they all toast?

    regards


  47. HMNY/Mito – Then they'll dilute it again, most likely.  

    LB/Dave – I think $40 is a realistic target so no reason to adjust the puts and if you have, for example, 10 long 2020 $30 calls ($5.10) and 5 short $40 calls ($2.10), I'd spend $2.50 to roll down to the $25 calls ($7.60) and buy back the short $40s and wait to sell 10 (full cover) of the $35s (now $3.20) for $4 or more so you would spend $2,500 on the roll and $1,050 to buy back the calls is $3,550 and, as long as you get more than $3.55 for the new short calls, all you've done is roll your spread target down $5 at no cost.

    HMNY/Pat – Well the $1 call is now a $250 call so yeah, toast!  Of course they will be just a close to $250 (9%) as they are to $1 now, so no difference.  

    Actually, reading the release, it said they were doing the reverse-split only if the referrendum to issue 5Bn additional shares (90% dilution) did not pass as a reverse-split would be necessary to keep from de-listing (though they will fail to meet the market-cap requirement anyway, so I'm not sure that really helps).  

    Presumably, they had an investor lined up who would give them money but at a steep price.  I wouldn't make a move like that that didn't solve my problem so, presumably, they had at least $250M lined up from someone willing to take less than 90% of the shares in exchange for the infusion that would , in theory, have gotten them to the end of the year, when the CEO CLAIMS they will stop losing money.  

    So, let's say they do stop losing money and get to 5M people who pay $200/yr for MoviePass – that's $1Bn in revenues but those people see 30 movies each for $10 is $1.5Bn in spending (1/4 of the entire US Box Office) so the question is can they squeeze $500M from that?

    • Well, I'm pretty sure they can get $10M from 30 movies that want to promote themselves – movies spend over $100M on promotions and this would be some amazing targeting so $300M.
    • Then there's kickbacks they are already getting from studios of up to $4/ticket but not all studios or all films but even 30M (20%) tickets x $120M.
    • Then there's lots of ad revenues and analytics they can sell (HMNY is an analytics company who got into this just to get the data) but it needs to be $80M to get them profitable.

    So, I can see a path to $500M but a lot of best cases to manage before they get there.  Still, if I have $250M to throw around (and what studio doesn't?) and I know that backing it can make it work (like HULU, who got Billions or they would have failed), then it's not too much of a gamble and it could give me control of 1/4 of the movie audience.  

    But, since they announced the split, we can assume the share issuance did not pass so now they go to plan B, which will be using the $22 stock to trade for other companies and try to cobble together something that has a bit of revenues to offset the cash burn.  

    It also says:

     Fractional shares will not be issued as a result of the reverse stock split; instead, the Board of Directors determined to effect an issuance of shares to holders that would otherwise be entitled to a fractional share such that any fractional shares will be rounded up to the nearest whole number.

    Maybe I'm crazy but it sounds to me like you can make 250x on your money buy buying one share for 0.09 and tomorrow they will round it up to one share at $22?  Someone please do that and tell me if it works!  It might not work because you don't really hold a share, your broker does and they hold shares for many, many people so the broker, in aggregate, would get one extra share at most.


  48. Not a pretty finish…


  49. The same people pushing for a $12B handout to farmers were opposed to longer unemployment benefits when bankers killed our economy! At least that crisis was not created by the people handing out the help…


  50. FB, GOOG, AMZN & AAPL once again holding up the NAS index to break even for the day. But only 968 stocks up vs 2010 down. Up volume 645,000,000 vs 1,347,000,000 down volume. Ramped the index up early and then dumped stock remainder of day.


  51. Good morning!  

    Futures down a bit on earnings from BA, UPS and GM, both of which were good but iffy guidance.

    Oil back to $68.50 but I like /CL short into inventories but get out if there's a profit and tight stops above.


  52. Purchased one single share of HMNY at 0.085 and I do indeed now own one share at the new price :)


  53. ROFL!  That is so ridiculous!  If only we could have opened up a million accounts and done that!  

    Thanks for testing my theory Ati!